Tag: Turbotax

Intuit’s TurboTax–the leading do-it-yourself tax preparation software used by million of taxpayers–abruptly turned off the ability to file 2014 state tax returns citing “an increase in suspicious activity”. This comes on heals of claims of “price gouging” by its customers which caused a major public relations uproar forcing the CEO of TurboTax to pen an apology.

[Intuit] has found an increase in criminal activity where stolen personal data is used to file fake state returns with state authorities. This illegal act allows fraudsters to claim tax refunds from state governments.

An internal TurboTax investigation has found the breaches are not due to a problem with its own systems, but criminals digging up the personal information elsewhere. The company said the investigation is ongoing. Intuit says it’s working with state tax officials to get the e-filing security back to where it needs to be to turn it back on…

TurboTax stopped allowing state tax returns to be filed when the state of Minnesota alerted them that they would no longer accept returns filed thought their product. This was discovered when two Minnesota taxpayers logged onto TurboTax to file their returns and were surprised to find out that their returns where already filed. The state is now reviewing thousands of returns as part of its investigation which at best is sure to delay refunds. No word yet on when TurboTax or affected states will resume e-filling tax returns.

UPDATE

The issues with fraud surounding TurboTax may not be limited to State tax returns. The FBI is now investigating claims that the fraud has extended to returns filed with the IRS, putting federal tax returns in jeopardy.

Imagine getting a congratulatory email from TurboTax that your federal return is on file when you haven’t yet filed! Given that virtually everything is electronic these days, that has become a massive issue…

But is anyone completely safe? The IRS estimates that it paid out $5.2 billion in fraudulent tax refunds related to identify theft just in the tax return filing seas (sic) last year. That seems like a bad number until you add the amount of bogus refunds last year the IRS says it was able to stop: $24.2 billion. Still, straightening it out if you are the one hit can be challenging…

If you have been affected by tax return fraud–either using TurboTax or by other means–please tell us about in the comments section.

TurboTax, the leading do-it-yourself tax software by Intuit, has caused an uproar with their customers claiming shady tactics of “price gouging” & “bait & switch”. Intuit has removed popular tax forms from their Basic & Deluxe programs, forcing clients to upgrade their software by at least $30 in order to have access to the same forms that were in last year’s programs:

Starting this year, people who prepare their taxes on a personal computer can’t use TurboTax Deluxe if they want to electronically file common tax forms, including Schedule C for a business, Schedule D for capital gains and losses or Schedule E for rental property. Instead, they must upgrade to the Premier or Home & Business versions—which cost up to $30 more than the $50 Deluxe version as of Friday.

Customers with simpler returns face a similar issue: They can no longer use TurboTax Basic if they want to itemize their deductions on Schedule A, such as mortgage interest or charitable donations, instead of claiming the standard deduction of $6,200 for a single filer or $12,400 for a married couple. Now, they will need to upgrade to TurboTax Deluxe, which costs up to $30 more than the $20 Basic.

“The company seems intent on fleecing the customer by increasing the price with no product improvement,” says Don Rickelman, a retired entrepreneur in Naples, Fla. In the past, he says, he has used TurboTax Deluxe to report his investments, but now, like many other users, he is considering alternatives.

Congress might have averted the “fiscal cliff,” but its last-minute action has created some big headaches and questions for tax filers.

“There’s a couple of impacts that I’ve never seen – this is my 44th tax season,” said John Hewitt, founder of Virginia Beach-based Liberty Tax Service and Jackson Hewitt, two of the nation’s largest tax-preparation companies.

Those who want to file a 1040 form electronically – the option favored by more than 90 percent of taxpayers – can’t do that yet because the Internal Revenue Service hasn’t signed off on finalized forms.

“Right now, a 1040 can’t be released,” Hewitt said. “It has a watermark on it saying, ‘Do not file.’ “

Filing paper forms probably won’t be possible until the end of the month, he said.

Taxpayers who like to knock out their federal and state returns together – whether filing themselves or using a tax preparer – face further delays because many of the states that collect income taxes don’t have their forms ready either.

“Typically, as of Jan. 3, we would be ready to go and fully tested in all the states that have income taxes,” Hewitt said in an interview Thursday. “Well, this year, only about a dozen of the states are ready to go because they’ve all been waiting on the federal government to act before they can finalize their forms and tax rates and so forth.”

Virginia will be ready by Monday, Hewitt said.

An IRS spokesman said Thursday that he could not say when new forms would be approved or whether there would be any adjustment of key dates for tax filings.

“Those decisions are under way and should be coming out relatively quickly, so stay tuned,” he said.

New legislation such as the fiscal package just approved by Congress needs to be reviewed, and IRS computer systems need to be configured to adhere to the bill’s provisions, the IRS spokesman said.

“These things don’t happen in a matter of hours; it takes days.”

Months ago, the Internal Revenue Service set Jan. 22 as the start date for the filing of electronically transmitted, computer-generated tax returns – the latest start date since electronic filing began in the late 1980s, Hewitt said.

“Those people that want their money quickly, that want their money in just a couple of weeks, are going to get it a week later than at any time since electronic filing was invented 25 years ago,” he said.

Carolyn Buzek is a Jackson Hewitt franchisee with eight offices in the Hampton Roads area.

“The IRS gets a bum rap in a lot of cases,” she said, adding that “everybody blames them for why you can’t file.”

“Well, it’s really Congress that makes the decisions, and the IRS has to scramble and try to figure out when you have the wording,” Buzek said. “Some of this is getting pretty complicated.”

California-based Intuit, maker of TurboTax, offers both online and desktop products enabling taxpayers to file their own returns. Electronically completed forms are transmitted to the company, which sends them to the IRS when it’s ready to receive them, Ashley McMahon, a spokeswoman, said Thursday.

Both products include prompts instructing users to download updates.

Hewitt said one of the biggest burdens his company will face this year is having to deliver the bad news to some customers that they will be getting their refunds late.

“These are people who live paycheck to paycheck,” he said, adding that they typically get returns averaging about $3,000.

Another burden is internal, affecting the biggest component of Liberty’s workforce – about 100 computer programmers.

Typically, they get information in October from the states with income tax.

“They have from October to January to get ready,” Hewitt said of his company’s programming staff. “Well, now we have only a few weeks to get ready.”

Hewitt said U.S. taxpayers are facing a situation “unheard of in the annals of tax preparation.”

Fellow tax professional Dave Ramsey recently preformed a survey of 2000 taxpayers; about half of who prepared their own returns, and the other half who had them prepared professionally. This is what he found:

When you use software to file your income taxes, there’s a moment, an instant just before the point of no return, when you silently wonder—what if?

What if I didn’t enter the numbers correctly?What if I miscalculated?What if I missed a deduction or credit?What if I claimed a deduction or credit I’m not eligible for?

All that uncertainty is one of the downsides of self-filing. Other disadvantages can hit you where it hurts most—your wallet.

Reduced Refund

Since most folks aren’t tax experts, it’s easy for them to miss deductions or credits when they self-file. They are also more likely to take the standard deduction instead of itemizing their expenses. Either of these mistakes could lower their refund.

Take a look at these numbers from our recent survey of 2,000 of Dave’s Facebook fans.

Self-filers got an average refund of just less than $1,500.

But folks who had their returns professionally prepared had an average refund of nearly $1,800!

Procrastinating self-filers, those who filed their returns during April, got an average refund of more than $1,800, while those who used a pro got an average $2,600 refund!

Those folks potentially lost hundreds of dollars by trying to save a buck and doing their taxes themselves. It doesn’t seem like such a smart choice now, does it?

Magnified Mistakes

The cost of DIY tax prep isn’t limited to the size of your refund. Your mistakes can also cost you in the form of penalties and interest.

The IRS checks every return for a signature (manual or electronic) and math errors and cross-checks all sources of income that are reported via W2s, 1099s, etc. So if you fail to report any income or enter the wrong number in the wrong column, the IRS will call you on it.

And if it turns out you owe taxes, by the time the IRS notifies you, penalties and interest will have already inflated that amount. You’ll be charged a penalty for paying late and you’ll be charged interest from the date the tax was due until the date of payment, and it compounds daily.

By working with a tax professional, you’ll not only have confidence that your taxes will be done right the first time, you’ll also have peace of mind that your tax professional will be there to help you if the IRS has questions about your return. File with [consumer] tax software, and you’re on your own if the IRS comes knocking…

The evidence is clear; trying to save pennies with DIY tax software can cost you thousands of dollars in unclaimed refunds, penalties and/or interest. And one of the most important losses is your time. Remember, even if you are using a “free” DIY tax service, you still have to take the time to for research, record keeping, learning the program and double checking all the figures. It obvious that receiving a larger well deserved refund is more valuable than smaller refund. However, the old adage that “time is more valuable than money” couldn’t be more true especially when the IRS reports that it can cost a taxpayer up to 32 hours simply to prepare an annual tax return!

This past June, New York became the 6th state to legalize same sex marriage. Regardless of ones individual beliefs concerning same-sex marriage, this much is clear: Tax laws–which are already complex & confusing–are that much more baffling for same-sex couples. This is mainly due to the fact that the Federal Government does not recognize same-sex unions. Same-sex couples must file separate federal returns, however they can file jointly in New York State and some other states that recognize these unions.

“What was supposed to be this way of expressing our love was going to seriously confuse our taxes, investments, estate planning, really all our finances,” says [Maggy] Porter, a registered nurse. “Our CPA is great, but even he seems pretty bewildered”

While marriage can save heterosexual couples a bundle, it could cost same-sex couples thousands of dollars in extra taxes and professional advice…

“Filing taxes for same-sex spouses is much more complicated, more expensive and time-consuming, and there is very little guidance from the IRS or elsewhere,” says Pan Haskins, a certified public accountant in San Francisco.

While the makers of popular do-it-yourself tax programs like Turbotax & H&R Block are modifying their programs to navigate these complex rules, financial planners are recommending that same-sex couples hire a tax professional to navigate these tax labyrinths:

New York State advises couples do two sets of federal returns — official individual returns for each partner, and a dummy return as if the pair were filing jointly. The joint return is “not to submit but to use it as a work sheet so that you are bringing the correct income information onto a joint state return,” says Ed Walsh, spokesman for the state Department of Taxation and Finance.

Some same-sex spouses are fed up enough to submit that joint federal return. Haskins reports, in her experience, the IRS has so far not challenged same-sex married returns. (IRS forms don’t ask for gender identification.) But she warns couples who file federal returns jointly that they risk financial penalties and a potential audit. “This,” she says, “is still the Wild West of financial planning.

CONSIDER HOLDING ASSETS JOINTLY: Income or expenses from joint assets can be allocated all or in part to either owner’s return.

INCOME: (e.g. interest, dividends, capital gains) may be shifted to the partner with the lower income, while deductions (e.g. mortgage interest, real estate taxes, capital losses) may be claimed by the partner in the higher income tax bracket. This could lead to tax savings for both partners.

TAXES ON HEALTH INSURANCE: Unlike heterosexual marriages, employer-based health coverage for same-sex spouses is not tax-exempt, and employers must report it as income to the IRS.

Even in the face of severe federal & state deficits, many tax benefits are due to raise for tax year 2012 (calendar year 2013). By law, tax provisions are required to keep pace with inflation. The new dollar amounts affecting most taxpayers are:

Individual Deductions and Credits

Personal and dependent exemptions are $3,800, up $100 from 2011

The new standard deduction is $11,900 for married couples filing a joint return, up $300

$5,950 for singles and married individuals filing separately, up $150

$8,700 for heads of household, up $200

Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, Deductions & Related Phase Outs

The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011.

The maximum income limit for the EITC rises to $50,270, up from $49,078

The foreign earned income deduction rises to $95,100, up from $97,300–an increase of $2,200.

The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000

$52,000 for singles and heads of household, up from $51,000

Annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.

Medical Savings Accounts (MSAs)

Self-only coverage

Family coverage

Minimum annual deductible

$2,100

$4,200

Maximum annual deductible

$3,150

$6,300

Maximum annual out-of-pocket expenses

$4,200

$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels

Estate & Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other

The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.

Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household

Oct. 17 is a key deadline for millions of individual taxpayers who requested an extension to file their 2010 tax returns. The IRS expects to receive millions of tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns.

Some taxpayers can wait until after Oct. 17 to file, including those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters. More information is available in IRS Publication 17 (2010), Your Federal Income Tax.

If you filed an extension and need to submit a tax return before this deadline, please contact us as soon as possible so we may assist you.

The TIGTA audits of the Volunteer Income Tax Assistance (VITA) sites–a program sponsored by the IRS which caters to low-income tax payers, the elderly & the disabled–found that their accuracy rate was far below 50%. Of the 36 tax returns that undercover TIGTA auditors had prepared at VITA sites, only 14 were considered to be filed correctly. That is a whopping 61% inaccuracy rate. What is particularly alarming is the deliberate “modified facts” that some volunteers engaged in to inflate potential refunds, as well as the absence of a thorough vetting process to weed-out potentially unscrupulous volunteers:

The accuracy rates for tax returns prepared at Volunteer Program sites decreased sharply from the 2010 Filing Season. Of the 36 tax returns prepared for TIGTA auditors, only 14 (39 percent) were prepared correctly. Tax returns were prepared incorrectly because volunteers did not follow all guidelines. For example, volunteers did not always use the intake sheets correctly. For three (14 percent) of the 22 incorrectly prepared tax returns, volunteers knowingly modified the facts the auditors presented…[Furthermore] Current steps and processes do not ensure the integrity of volunteers, even though the volunteers have access to taxpayers’ Personally Identifiable Information, such as Social Security Numbers, driver licenses, and home addresses.

TIGTA Inspector General J. Russell George had the following to say:

The findings of this review are very troubling…The Volunteer Program plays an important role in helping many taxpayers, notably those who have low incomes, and the elderly, disabled, and limited-English proficient, participate in the tax system. Like all taxpayers, they deserve to have their tax returns prepared accurately. I am pleased that the IRS has agreed to our recommendations to address these problems.

Some of the important TGITA recommendations agreed to by the VITA program are as follows:

Include anonymous shopping visits as part of the quality review process

Improve controls over Volunteer Standards of Conduct (Form 13615)

Develop a process to ensure all volunteers are following the guidance focusing on the integrity of the Volunteer Program and the security of taxpayer information

Review the IRS fraud hotline procedures to determine best practices

R&G Brenner recognizes the valuable service that the thousands of VITA volunteers provide to millions of taxpayers across the country. However, it is apparent that the quality of these returns leaves much to be desired considering the continually changing & vastly complex tax code. When you pair this with the fact that most VITA volunteers receive little or no compensation, it is not hard to see why so many returns are being prepared incorrectly, and that an environment for potential identity theft is being sewn.

For many, a tax return is the most important financial document they will file each year. Therefore, it is of the utmost importance that your tax preparer have a vested interest in the accuracy of your filings. Here at R&G Brenner, we offer many promotions including a $50 introductory fee for new clients that qualify for tax assistance. We can’t compete with “free”, but we can guarantee that our tax professionals, enrolled agents & CPA’s will have an attentive vested interest in preparing your return accurately, and getting you back every penny you deserve. Remember, it’s not “free” if you are forced to spend considerable time retriving old tax documents, and money on penalties and interest correcting mistakes. Contact R&G Brenner for more information, and to have your tax return reviewed for accuracy free of charge.

Thanks to the efforts of Mr. Charles Freret, the following fax was sent by the Vice President of TurboTax. If you are a taxpayer that has used Turbotax and filed with a 1099R for tax years 2007, 2008 or 2009, you should contact Mr. Meighan via fax at 858-408-2714

Last week, I did a blog post about Mr. Charles Freret who went on a one-man crusade to expose a flaw in the popular do-it-yourself tax program: Intuit’s TurboTax. You can read that article & post here. After Mr. Freret read the aforementioned post, he contacted R&G Brenner and agreed to sit down for an exclusive interview. Mr. Freret’s story of persistence to discover the truth is incredible. What he uncovered along his journey is TurboTax is miscalculating tax returns on a large scale. And upon further investigation, the TurboTax flaw was present not only in the current tax year program, but tax years 2008 & 2007 as well. Coverups, Lies & Government disinterest all will eventually lead to more money out of TurboTax users pockets. Here is his story:

R&G Brenner (RGB): How long have you been preparing your own taxes?

Charles Freret (CF):…over 40 years

RGB: So you’re pretty well versed in preparing your own taxes, and you have been doing them by hand!?

CF: Yes

RGB: Was 2010 the first year you used TurboTax?

CF: No, I used it once before in 2004

RGB: But this tax year, you discovered a problem with the calculation of your taxes using TurboTax?

CF: That’s correct, and the only reason I used it this year…was because I had a free [e-file] submission

RGB: In order to get your refund a little faster?

CF: Yes

RGB: Ok…and you discovered that there was a problem with TurboTax increasing your refund.